PIF-controlled Tesla rival Lucid goes public; wealth fund backs VC firm

 PIF-controlled Tesla rival Lucid goes public; wealth fund backs VC firm

The Lucid Air sedan. Photo credit: Lucid Motors

Lucid Motors Inc, a US-based electric vehicle startup that competes with billionaire Elon Musk-led Tesla Inc, is going public via a blank-cheque company in a deal that values it at $24 billion.

Lucid said Monday it will merge with Churchill Capital Corp IV, a special purpose acquisition company (SPAC), and list on the New York Stock Exchange. This will perhaps be the biggest SPAC deal till date.

The electric vehicle company is controlled by the Public Investment Fund, the sovereign wealth fund of Saudi Arabia. Churchill Capital is controlled by Michael Klein, a former Citibank executive and a serial SPAC investor.

A SPAC is an investment firm that raises capital via an initial public offering with an aim to acquire another company. A large number of SPACs are floating IPOs in the US as stock markets soared over the past few months.

Lucid said in a statement it is merging with Churchill Capital Corp IV at a transaction equity value of $11.75 billion.

The carmaker will get $2.5 billion from the money raised by the SPAC. Parallelly, it will raise funding via a private investment in public equity (PIPE) round at $15 per share. PIF will lead the PIPE round. Other investors in the round include BlackRock and Fidelity Management.

The deal values Lucid at an initial pro-forma equity value of about $24 billion at the PIPE offer price. It will also provide Lucid with about $4.4 billion in cash.

PIF had first agreed to invest more than $1 billion in Lucid in 2018. That deal was closed in April 2019. In June last year, media reports said that the Saudi wealth fund owned more than half of Lucid Motors. At present, PIF controls 85% of the company and will continue to be a majority owner with a 62% stake even after the listing.

A news report in Financial Times said that at $15 per share, or a 50% premium on the net asset value of the SPAC, this PIPE deal ranks among the biggest ever. However, since the shares of the SPAC have run up more than 500% in anticipation of the deal, the value is at a 74% discount when compared to its stock price, the report said.

Lucid was founded in 2007 as Atieva by former Tesla engineer Peter Rawlinson. It has 2,000 employees currently and plans to hire another 3,000 by the end of next year.

Lucid rivals Tesla and is expected to disrupt the Musk-led company’s dominance in the electric car market. Tesla’s shares have soared over the past year, catapulting its valuation to around $685 billion.

The company is currently manufacturing the Lucid Air, a $1,69,000 electric car at its Arizona plant. This will be a 500-mile range sedan. It will be followed by a sport-utility vehicle by 2023.

PIF backs VC fund

While one PIF portfolio company is going public, the sovereign investor is also placing a bet on a new fund from venture capital firm Hambro Perks Ltd.

PIF has come in as an anchor investor for the $50-million Oryx Fund, according to multiple media reports. PIF’s exact investment in the fund couldn’t be ascertained.

The new fund will focus on the Middle East and North Africa (MENA) region. It will invest in companies at late-seed and Series A stages, in sectors like fintech, health-tech, logistics-tech, ed-tech and enterprise-tech.

Some of the fund’s investments include Sarwa.co, Trukker, Souqalmal.com, What3Words and Beehive.

Aman Malik

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